Production order postings

Material Costs

Materials are issued against Valuation Prices. The valuation price is stored on the actual WIP value on the aggregated cost components. The costs are labeled as non-added costs.

When LN issues materials, a moving-average unit cost (MAUC) price is booked. The MAUC price in the Estimated vs. Actual Material Costs (ticst0501m000) session is the actual standard cost for the material line.

JIT items are directly received in WIP without passing a warehouse. Special financial transactions exist for these items to enable direct receipt and billing on use. For these type of transactions the purchase result (when FTP valued item) is also entered into WIP.

The postings for materials costs are done for the following origin/financial transactions:

• Production/Issue
• Production/Issue direct receipt
• Production/Purchase result direct receipt

Operation costs

Operations cost can be split up in two parts:

• Hours costs

  In the Estimated vs. Actual Hours Costs (ticst0502m000) session, the cost per operation are displayed.

  The actual hour costs are posted and processed from People. If the Process Hours using field in the Production Order Parameters (tisfc0100s000) session is Estimated rates, the hours cost are calculated by using the operation rate and the cost component from the Standard Cost Calculation module.

  If the Process Hours using field in the Production Order Parameters (tisfc0100s000) session is man and machine rates, the hours costs are calculated by using rates and cost components from the machine data in the Machines (Machine Types) (tirou0102m000) session and the employee data in the Items (tcibd0501m000) session.

  The hours costs are disaggregated to labor costs, machine costs and overhead costs. For the posting of the overhead, LN checks the Cover Overhead Costs in Employee Department check box in the People Parameters (bpmdm0100m000) session.

  The postings are generated on the moment of process hours accounting. The number of hours can be:

  • Entered manually
  • Generated by backflushing

  The operations costs are posted to the calculation office or to the enterprise unit of the work center. The postings for operations cost are done for the following transaction origin/financial transactions:

  • Production
  • Operation costs

  Hours are posted against the detailed cost components that are defined in the operation rates. Price and efficiency variances are calculated based upon these detailed cost components.

• Subcontracting costs

  LN considers subcontracting as the purchasing of a subcontracting item. The purchase order price of the subcontracting item is calculated by using the subcontracting calculation method and the rate factor in the Standard Cost Calculation module.

  The postings are generated the moment when you receive the subcontracted intermediates and are posted to the JSC calculation office or to the enterprise unit.

  The subcontracting result is determined by comparing the estimated and the subcontract price. So the purchase order price and the actual amount on the purchase invoice are compared. Before you close the production order the purchase orders, generated for subcontracting operations must have been processed. If the order estimate does not contain any costs for subcontracting, you cannot determine subcontracting results.

  Both operation hours and subcontracting costs are regarded as operations costs.

WIP transfers

Production surcharges

The surcharges related to the production orders are the item receipt surcharges. Surcharges are always posted to the calculation office and are considered as production WIP. The surcharges are posted when the order is completed. Surcharges are based upon the estimated order costs. Upon order closing, the actual order costs, the actual surcharges are calculated. Surcharges are always calculated and posted on the production order level by means of detailed cost components.

Production completion and receipt in inventory

The following phases can be distinguished:

• Report a quantity completed
• Report the order completed
• Receive the items in the warehouse

If the items are reported completed, LN activates a warehouse order. A warehouse order can have a certain inbound procedure. As a result there can be a time lag between the moment reporting completed and the moment the items are posted to the warehouse. This time lag reflects the WIP values.

If a quantity of items are reported completed, these items are posted to the calculation office. A WIP transfer is carried out from the last operation/work center to the calculation office. The reported quantity stay on the calculation office until they are received in the warehouse. Upon receipt in the warehouse the WIP on the calculation office is decreased with the FTP value (minus warehouse receipt surcharges). Both postings are based upon the three aggregated cost components of the end item. The postings are carried out for the following transaction origin/financial transactions: Production. Completion Production. Receipt

First the item is posted to stock with the FTP value. Because you do not know the actual production order cost the actual item (unit) costs cannot be calculated. The actual order costs are determined upon order closure.

Price, efficiency, and calculation variances

LN calculates a price variance, an efficiency variances and a calculation variances during the:

• Closing of an operation
• Intermediate calculation of production results
• Closing of a production order